Broadened Respa Plan Attracting More Critics

American Banker (03/04/08) P. 1; Hopkins, Cheyenne
The 271-page plan proposed by HUD to reform the Real Estate Settlement Procedures Act (RESPA) is broader than a proposal considered in 2007, drawing more scrutiny from the real estate industry. The latest proposal calls for a standardized good-faith estimate spelling out such details as the initial interest rate and monthly payment, the possibility of a rising balance and whether or not property taxes are put in escrow. Additionally, limits would be imposed on fees charged by lenders to prepare the estimate, and settlement costs could not exceed the estimate by more than 10 percent; however, the proposal calls for eliminating the 1-percent limit on fees in exchange for more transparency when writing FHA loans. Furthermore, the proposal amends the kickback provision that makes it illegal to accept a "thing of value" for a mortgage agreement by removing certain discounts negotiated by settlement service providers from the definition. With regard to the belief that reform would make the loan process easier for consumers to comprehend, Mortgage Bankers Association senior vice president for governmental affairs Steve O'Connor says, "We do have some concern that the forms themselves seem to be more complicated instead of less complicated." O'Connor also believes it will be difficult for HUD to finalize the rule this year, meaning that the new administration ultimately could be charged with preparing another proposal.